Long on Homestore

New CEO focuses company on needs of real estate pros

April 1, 2002

Meet the “new” Homestore.com.

The Westlake, Calif.–based company that runs REALTOR.COM for the NATIONAL ASSOCIATION OF REALTORS® is emerging from its recent accounting troubles a smaller, more real estate–focused enterprise with a seasoned businessman in the lead.

W. Michael Long joined the company Jan. 7 as its new CEO, a man Michael Lewis, in his 1999 book about Internet business, The New, New Thing, called “a serious executive.”

Long, 49, brings to Homestore more than 20 years experience leading public companies, including having been president and CEO of The Continuum Company, Inc.; CEO of Healtheon Corp.; and chairman of WebMD, Inc., after its merger with Healtheon. Homestore in January also brought on two of Long's colleagues from Healtheon/WebMd: Jack Dennisson and Lewis Belote III, who are Homestore's new COO and CFO, respectively.

According to Homestore Chairman of the Board Joe Hanauer: “Mike Long’s background as a successful CEO, as well as his deep experience in technology, financial services, and the Internet, make him what we believe to be a remarkable fit. Most important, however, is that his obsession isn’t with the technological aspects of his business. Rather, it’s with his deep conviction that for a company to succeed it must consistently provide very strong value for its customers. This theme of providing compelling value for REALTORS® is what we expect you’ll be seeing from REALTOR.COM in the months ahead.”

Long says he’s spent much of his first month at Homestore traveling the country, talking to the real estate professionals the company serves—and wants to serve better.

REALTOR® Magazine caught up with him in late February to ask about the future of Homestore.

Is Homestore a viable company?

Long: Yes, I believe it is. We recently completed a process of realigning the company. We decided that our strategic focus needed to be on serving real estate professionals and making their businesses more profitable and more productive; that’s what we decided the new Homestore should be about, exclusively.

We also evaluated all of the investment and technology projects underway to determine which were necessary to support our strategic business initiatives; those that were not essential have been discontinued.

And we evaluated all the corporate services we provide to the business and determined which of them were essential to our strategic business units; those that were not essential have been discontinued.

The net result of this is a smaller, more focused company, and, we think a neater and a financially stronger company.

Really, the viability of any company comes down to two characteristics. The first one is providing products and services that customers view as valuable and important to the success of their businesses. The second one is managing the financial resources and talent so as to be able to deliver on your commitments to customers. Now that we’ve gone through the process of realignment, we believe we have both of these characteristics at Homestore.

We issued a press release dated Feb. 13 that was a very important statement for the company to make. We said the company expects its cash flow from operations to be positive for the full year 2002.

So, the worst is over for the company?

Long: Let me say this. I was aware that there were serious issues here when I joined the company on Jan. 7, and what I can say is that everyday since, I like the company better than the previous day. Are we facing significant challenges? Absolutely. But everyday I believe those issues are more manageable, and I believe that because of all the time I have spent with customers so far. They are very much behind this company and behind REALTOR.COM.

What are your plans for Homestore going forward?

Long: Homestore has been on an aggressive diversification strategy, moving into areas that went beyond real estate. As I said, the process we went through in my first five weeks here was to determine which of our business units were truly strategic. And what went inside the strategic circle for us were products and services that serve our core constituency of real estate professionals in three major areas.

One is REALTOR.COM; we view this Web site and Homestore’s relationship with NAR as central to our company’s strategic future. Another of our core businesses is serving the home building industry, and the third is helping individuals find suitable rental property. And then, of course, all of the Web-based or software-based technology services we offer to support these strategic business units are inside our circle of core businesses.

There was both a need and a desire among our customers and our employees that we get back to our knitting, and so the whole realignment process has gone remarkably smoothly. We really exist to support our customer, the real estate professional. I know that sounds simplistic, but it’s easy for a company to lose sight of that, with all of the media and Wall Street attention on the company for the last several years.

One of the things we’ve done in the near term to focus on our customers is create a new Customer Advocacy Program. We’re organizing customer feedback circles and advisory groups so that any new product and service we introduce will be the result of a confirmation process with our customers that the product or service is, in fact, something they need.

We’re also looking at ways to better serve salespeople and brokers just coming into the business. This is a segment of the REALTOR® community that I think we haven’t served adequately in the past.

You’ve said that you want to increase the value proposition Homestore offers REALTORS®. What, specifically, do you mean?

Long: We believe that for our products and services to be of value to REALTORS®, we have to demonstrate that we can increase their profitability and improve their productivity. We have to provide services that promote the REALTOR®, promote the listings of the REALTOR®, and generate leads for the REALTOR®. To do this, we’re focusing on more effectively integrating our products and services and on better quantifying the results.

Let me give you an example. We have a lead generation and productivity tool called Top Producer, which has historically been delivered as a desktop software product. We've moved that product to a Web-based service, so we’re now able to integrate Top Producer with our iLead service. By integrating these products, we’re able to more effectively capture the leads, which will help REALTORS® build a database and convert prospects into customers.

Another example would be integrating our interactive-voice-response services--calling an 800 number on a For Sale sign to get more information on a house--with our I-Lead page service so that we’re able to communicate seamlessly an inquiry for information by the consumer to a REALTOR®’s I-Lead page on the Web and then on to their telephone.

These are just a couple of examples of what we’re doing to improve the value proposition. We’re committed to keeping REALTOR® at the center of the homebuying and selling process and increasing their profitability and their productivity.

REALTORS®have taken issue with Homestore’s customer service in the past. What are you doing to improve things?

Long: Our Web page services have been too complex; they placed too much of a burden on REALTORS® to understand the technology. And, so, simplification of the product and services is a priority.

Also, we’ve invested heavily and we’re increasing the investment in our customer care center in Scottsdale, Ariz., so we can be more responsive when a REALTOR® needs to speak with someone on the phone.

Customer service is really the heart of our business strategy. Every person who works for Homestore is a customer service representative, whether you’re an assistant programmer, a receptionist, or the CEO.

To emphasize that, we’ve rolled out the Customer Advocacy Program, which I mentioned earlier. A part of what that’s about is having employees throughout REALTOR.COM take responsibility for making direct contact with our customers to understand their needs, build personal relationships, and help them resolve any issues. This will supplement our formal customer service function.

We want to engage all our employees in understanding our customers, and that’s going to be reflected in us delivering better-targeted products and services. I hope it will create a heightened awareness among our customers that this company is all about serving them.

How will you be positioning Homestore as a brand in relation to the REALTOR.COMbrand going forward?

Long: I’ve been on the road quite a bit for the last four or five weeks visiting customers, and this has been a persistent question.

Our philosophy at the new Homestore is to leverage off of the brands that are already well established in the market, and REALTOR.COM is one of the strongest brands in any market, not just real estate. We are focusing on enhancing the REALTOR.COM brand in partnership with NAR.

To some degree, the motivations for building that Homestore brand may have been that the company had ambitions of utilizing that brand even beyond the real estate industry, but the company no longer has any such ambitions. We have focused the company on our real estate constituency, and that means it’s far more productive for us to emphasize and promote the brands that are already well known in real estate, rather than trying to create another one.

Of course, we’re not going to throw away the Homestore brand. It is the name of the company. So if we have only one presence on a Web portal for promoting the real estate category, we’d use the Homestore brand. Consumers come to us because they’re looking for shelter, whether it’s renting an apartment or whether it’s buying a home. But once it’s clear to us that they want to buy an existing home, then all of the promotions is about REALTOR.COM. We intend to use the Homestore brand strategically to help drive traffic to REALTOR.COM. But the big focus is on REALTOR.COM as a powerful brand that’s well known by consumers, and, so, it’s only smart for us to promote that.

Is developing a transaction management platform still a priority for Homestore? As recently as a year ago, Homestore said this was an important initiative to help REALTORS®remain the key point of contact with consumers in a digital world.

Long: Yes. The answer is yes, but with some qualifications. As I said earlier, the big focus in our company now is making sure we are the best we can be, and that means making REALTORS® as good as they can be at lead generation and at converting prospects into customers and then to potentially having a home under contract. The next phase is to get from contract to close, and that’s what I’m calling the transaction process.

We have a technology platform. We can bring technology to that process, and we are bringing technology platforms to the process, but we also believe that there is a tremendous amount of varied ability in transaction processing. For example, the regulations and procedures around closing real estate transactions vary from state to state. And, so, we are partnering everywhere we can to present to REALTORS® solutions that work, that are incremental to what will ultimately, we think, evolve into an end-to-end solution all the way from lead generation to actually closing the transaction and then managing the relationship with the consumer even after the transaction is closed. We’re more interested in getting this done right than in getting it done fast.

An example of where we chose to partner, and that we think is working successfully, is in a business that we own in part with the CALIFORNIA ASSOCIATION OF REALTORS® and the NAR called RE Forms.net that allows real estate forms and the data that goes into them to be captured electronically.

We have built a transaction-processing platform, but we are going to move to a comprehensive transaction processing solution very carefully. Moving ahead incrementally will, we think, provide the best solutions for our customers in the long term. Right now, we’re focused on our task at hand, which is improving the value proposition to REALTORS® in the lead-generation and contracting phase of the transaction.

You’ve been traveling the country extensively since you took over at Homestore, talking with REALTORS®and other customers. Is that something you plan to continue?

Long: Yes. It’s just the way I’ve been trained as a businessman; I’ve been in business now for nearly 30 years, and I don’t know any other way. The reason for the business existing is to serve customers, so it’s the responsibility of the CEO of that business to also be the chief quality control officer and to go out and spend time with customers to see how effective the products and services are and to see where problems can occur. This isn’t something that can be delegated by a CEO. It’s a business necessity.

And maybe there was a disconnect that occurred, say, over the last four years of “commodification,” if you will, that maybe evolved in the .com culture, a kind of distancing between companies and their customers. I think history is proving that that trend is reversing itself, and customers demand and deserve personalized service, and the CEO establishes the example for his company in caring about his customers.

Are there any Web companies that you would point to as a model of how you want Homestore to operate?

Long: I don’t look to other Web companies as a model. I actually like our model: It matches real estate professions with consumers interested in buying real estate. And what we have done is narrow our focus at Homestore back to that original model. Homestore’s difficulties can be traced back to a failed diversification effort beyond its core business of serving real estate professionals.

But the diversification of our revenues from advertising and subscriptions, as well as technology-based products and services, has proven to be a very smart strategy based on what’s happening to other some other Web companies. They got in trouble because they didn't have a diversified revenue stream. So that’s kind of a long answer to your question. The short answer is: No, I don’t see another Web company that we want to be like when we grow up. I like our model. It’s a matter of improving the execution and of our model.

What are the biggest obstacles facing Homestore right now?

Long: As far as obstacles, right now, I don’t see any as being competitively generated. Our problems are self-inflected. The good news about that is that we have within our power the ability to correct our problems, and with continued support from our customers, giving us time to deal with our issues, our company will. Certainly, the real estate industry is doing well, and that’s real good news because it means our customers feel successful, and, so, that’s good for Homestore.

Do you consider HomeAdvisor a threat to REALTOR.COM?

Long: I take all competitors seriously. But I like our competitive position versus any of our competitors, of which HomeAdvisor is one important one. And you always take Microsoft seriously in any market, given their history. But right now, we’re better served focusing on executing our model and focusing on our customers. And I think if we do that well during 2002, that’s the best thing we can do to our competition.

What do you feel are your key strengths as a businessman?

Long: What I can say is what I’ve learned in my 30-year business career, and because I’ve learned these lessons, they become, hopefully, strengths that I have personally. And the first one, which I’ve mentioned several times now, is that customers matter, regardless of whether it’s a small customer or a large customer. I know of no way to build a successful business where customers are not at the center. So, the fact that I believe that I would suggest is a strength.

Second of all, I would suggest open communication is fundamental to successful business enterprises. I’m talking about the enterprises, I’m talking about the extended enterprises, which incorporates employees and customers, and all stake holders--open communication leads to better understanding which leads to better resolution of issues, and, so, I strongly believe in that.

And thirdly, I would suggest that I have made enough mistakes in my 30-year business career. You learn more from your mistakes than you learn from your apparent successes. So I’ve learned to be modest about success and fanatical about addressing issues.

Pamela Geurds Kabati is the former publisher of REALTOR® Magazine and senior vice president of communications for the NATIONAL ASSOCIATION OF REALTORS®.

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